This excerpt from Richard Anatoneis a clear explaination of the fiat money fraud.

The federal reserve fraud system

...It is also important to realize that the Federal Reserve is an Unconstitutional institution. The Congress and the Congress alone has the authority to coin money. The Constitution does not say that the Congress could create a bank through the legislative process and divert the money-making process to them, and therefore, through the 10th Amendment, the Congress is not allowed to do so…but that didn’t stop them. Thanks to President Wilson (and the bankers who met at Jeckyll Island almost 100 years ago this year and planned the system), we are now stuck with a monetary system backed by nothing but US government debt.

One thing to bear in mind is that the way money is made is ridiculously complicated, as it is reclassified as new terms, and newly printed money is printed—That’s the plan: it’s supposed to be confusing because that way people will give up and continue to go about their lives not really caring to know how their money is being sucked dry from their bank accounts. I have labled this with ’steps’ to make things as easy to understand as possible.

First, the Government has no money. They can obtain it two different ways: tax the people, or print up bonds or treasury notes to sell to the people. The Government has other debt too, but the bonds make up most of it. Either way, the Government has no money. So,

1. The Government gives the Federal Reserve the bonds and treasury notes that people don’t buy, and in exchange, the Fed gives the government a Federal Reserve Check. Meanwhile, the bond and treasury notes are re-classified in the Fed as a “Securities Asset” because it’s assumed that the government will make good on the promise to pay the Fed back the money it just borrowed from them.

2. The Government now has a Federal Reserve Check. This is money used to pay government expenses. They endorse it and send the money to Federal Reserve Banks, where the check now is classified as a Government Deposit.

3. As a Government Deposit, the money is used to pay many expenses, and so it is re-classified as Government Checks.

4. Government Checks are given to Government employees, who deposit these checks in their own Commercial Banks (Citizens, Bank of America, etc.)

5. This is where it gets fraudulent (more than it already is, anyway). The deposited checks are liabilities to the bank because they are liable to pay it back to the depositors. But, as long as they remain in the bank, they’re considered assets, and so the books ‘balance out.’ (It’s important to know that if you or I did this in our private business or tax filings, we’d be thrown in prison for the rest of our lives).

6. The so-called assets (which are nothing more than deposits which are really liabilities), are now re-classified as Bank Reserves. The banks are permitted by the Fed to lend out ten times the amount of those deposits (which are named “Excess Reserves”) as new bank loans. They literally create the money from a computer; from nothing. It is backed only by the borrowers signature promising to repay. Think about that for a minute: This is a double claim on the same money that was originally deposited as Government Checks. So, to prevent a double-claim on this money, they just print new money out of thin air for the exact purpose of off-setting the double claim. And better yet, the banks are allowed to collect interest on this new money from their customers, and considering it cost them diddly-squat to make the money, that isn’t bad (unless you have a moral conscience).

7. When the second wave of fiat money moves into the economy, it goes right back to the banks. The previous process (steps 5-6) are repeated, but this time with a twist. The loans of last week are now deposits this week, which are reclassified as ‘reserves’, and again, 90% of that is defined as Excess Reserves, and that means that the bank, in order to prevent a double-claim against the same money, prints NEW money out of thin air. Thus, 90% of the original 90% is brand-new money, and this happens again…and again…and again…approximately 28 times for the same money to become deposits, loans, then deposits again, etc.

8. All of this adds up to: Bank Fiat Money is about 9X the National Debt that started the entire process when they asked the Fed for some money. Adding the Original Debt, that makes the Total Fiat Money equivalent to 10X the National Debt…this is where the term “ghost dollars” comes from—for every 1 dollar that exists, 9 ‘ghost dollars’ exist.

9. This means that Inflation is about 9-10X the National Debt, meaning OUR TAXES ARE 9-10 TIMES THE NATIONAL DEBT. Without realizing it, through inflation, our taxes are through the roof due to inflation. This becomes especially scary when you realize that because our monetary system is based on debt, the money supply goes up the deeper into debt we become. When we pay off our debt, then the money supply goes down, and prices collapse (in reality, they ‘reset’ to what the Free Market and the laws of Supply and Demand want). This is cause of boom and bust cycles. In essence, if we didn’t have debt, then we wouldn’t have money.

The Dollar is Doomed

Earlier this week I attended the Utah Monetary Summit in Salt Lake City, Utah. As you may know, the state of Utah passed a Legal Tender Act earlier this year authorizing the use of federally minted gold and silver coins as money in the state of Utah. Now, legislators in other states, many of whom attended the Monetary Summit, are evaluating similar legislation.

Among other things, this means the United States is approaching a Constitutional crisis because states are beginning to financially break away from the federal government. This is no less serious than the American War of Independence or the War Between the States. The Utah Monetary Declaration (below) is a financial declaration of independence whereby states are beginning to opt out of the Federal Reserve System. A major confrontation seems inevitable.

The issues underlying this historic development include:

1. The unsound condition of large U.S. banks, which have inaccurate and crumbling balance sheets along with $250 trillion in high-risk OTC derivatives contracts;

2. The unstable nature of the U.S. and world financial systems, characterized by unworkable levels of sovereign debt and private debt and by over $600 trillion in OTC derivatives liabilities;

3. The excessive levels of federal government debt and unfunded liabilities combined with falling federal tax revenues prior to the start of the double-dip recession that began in the second half of 2011;

4. The radically inflationary monetary policies of the federal government and of the Federal Reserve, which promise high inflation or hyperinflation in the future;

5. The worsening condition of the real U.S. economy outside of large banks, multinational corporations, and Wall Street firms, where federal government bailouts and Federal Reserve monetary easing (money printing) transfer wealth from proverbial Main Street to literal Wall Street;

6. The rapidly escalating polarization of the distribution of wealth, which threatens not only the economic stability of the United States but also its social and political stability; and

7. The current, highly inflationary monetary system is plainly unfair and fundamentally immoral.

As a consequence of these grave, ongoing and growing problems, which are being largely ignored by the mainstream news media, state governments must take immediate action to ensure the functioning of local economies and of state governments, should the federal government / Federal Reserve System break down. Specifically, there is an urgent requirement for an alternative currency to the privately issued Federal Reserve Note, which is erroneously referred to as the “U.S. dollar.”

Replacing a stable form of money with ever expanding debt and inflation undermines capitalism and destroys jobs. The monopolistic monetary system of the United States today is inherently inflationary because it must continually expand in order to prevent a deflationary collapse. The underlying structure and root cause of the monetary system’s inherent and inescapable inflationary bias is the legal construction of money as debt with no direct link to real economic activity. Debt levels in the economy and bank profits are simply out of line with reality.

In addition to the unsustainable and unstable nature of such a system, an inherently inflationary monetary system destroys savings by devaluing the currency. Savings, which are the result of excess production, precisely define the term “capital.” Replacing capital with debt, while highly beneficial for banks that create money out of thin air (through lending), is a deeply flawed concept responsible for the systematic and ongoing breakdown of capitalism in America. This deep, structural problem is the absolute root cause of chronic, irremediable unemployment. As a consequence, there will be no genuine economic recovery in the U.S. and jobs will not return unless and until the monetary system is fundamentally reformed.

An ultimately more important issue is also garnering attention among state legislators, prominent (non Keynesian) economists, religious leaders, political activists and voters. Inflation, particularly if it is systematically understated by the federal government or Federal Reserve, robs savers of the proceeds of past labor and robs workers of the spending power of their wages, living standards and financial futures. Inflation robs the elderly of their retirement and robs investors of their capital by facilitating taxes on alleged gains created solely by currency debasement. Legal tender, created as debt, results in ever larger debt burdens thrust upon innocent future generations that will experience progressively lower living standards and reduced economic opportunity. Generations to come will be born into debt bondage, thus the monetary system is at the center of a profound moral crisis.

The morally and literally bankrupt nature of the current U.S. financial system is transforming America into a dog-eat-dog society where every person seeks to live at the expense of someone else rather than by producing wealth, because production is systematically stolen by the federal government and by banks through the clever device of an inflationary monetary system. The monetary system operates by exchanging fictitious “wealth” (debt based money created out of thin air by private banks) for the real wealth of borrowers, i.e., the proceeds of their labor. In effect, the monetary system is a massive scam purported to be legal but lacking any demonstrable legal authority. Specifically, there is no Constitutional or other legal basis upon which the federal government can force a private monetary monopoly on the states. In fact, the Constitution of the United States explicitly establishes the exact opposite.

The oversized banking system and federal government have grown in an unholy alliance in lock-step and now consume so much of the U.S. economy that, together, they not only pillage the real economy but threaten to kill, once and for all, what is left of the free country founded by the Declaration of Independence. The moral precedent and example set at the highest levels of the federal government and of the banking cartel is that profit, fame, success and wealth are (either directly or indirectly) rewards for immoral acts rather than for honesty in business. Moral corruption at the top–embedded in the very structure of the monetary system–has slowly spread its gangrenous effect, undermining totally the founding principles of the United States of America, enshrined in the Constitution of the United States and in the Bill of Rights. Rather than liberty, America’s legacy is fast becoming one of moral turpitude enshrined in financial injustice and oppression.

The challenge before our nation today–our moment in history–is not merely a financial or economic or political or legal / Constitutional crisis. It is also, and primarily, a moral crisis that could literally destroy the United States of America and all that it has stood for in more than two centuries. A stable society requires sound principles. A moral society requires sound money. Today, the United States of America has neither.

This message is a call to action. In the words of poet Dylan Thomas, let us say for America “Do not go gentle into that good night / Rage, rage against the dying of the light.”

I am personally asking you to read the Utah Monetary Declaration (below), which I, among many others, signed on Monday evening, September 26, 2011, in the Post Chapel on the University of Utah campus at Salt Lake City, and to forward it to all, especially to your state officials. Time is of the essence. Although its duration and pace are as yet unclear, the crisis is already upon us. Please act now and do not delay.